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With the brighter days emerging as we listen to the birds chirp and watch the flowers bloom, it’s the perfect time to spring clean your finances. Just like tidying up your home, spring cleaning your finances will help you declutter, organise, and set yourself up for financial success. It can take away the stress and anxiety around money and give a plan to help you meet your goals. In this post, I’ll walk you through the essential steps to revitalise your financial health and make the most of your money this spring.
Create a Budget: Building Your Financial Foundation
One of the most crucial steps in spring cleaning your finances is creating a budget. Think of your budget as a roadmap for your money, guiding you toward your financial goals. Start by listing all your sources of income and then track your fixed expenses, like regular bills then variable expenses, such as groceries, entertainment, and savings. Be honest with yourself about where your money is going and identify areas where you can cut back or reallocate funds. This can be quite time consuming at first, but I promise it is worth the effort. You may be shocked to see how much you spend on those B&M trips where you were ‘only popping in for one thing’ (we’ve all been there!) or how much you really spend on takeaways. Make your budget realistic and ensure that it works with your own financial goals.
There are plenty of budgeting apps and tools available to help you track your spending and stay on course. I will even have the budgeting spreadsheet that I use available soon. Watch this space!
Manage Your Subscriptions: Trim the Excess
In today’s digital age, it’s easy to accumulate subscriptions for streaming services, magazines, gym memberships, and more. Take some time this spring to review your subscriptions and weed out the ones you no longer use or need. Cancelling unused subscriptions can free up extra cash each month, which you can put toward savings or paying down debt. Consider consolidating similar subscriptions or opting for more cost-effective alternatives. I talk about ways to do this in this post. You can also save money by getting cashback for your subscriptions through sites like Quidco to bring the cost down.
I am definitely an advocate of if you want it and definitely use it, try to find ways to get the same thing cheaper. The goal is ultimately to save money, not cut everything from our lives that we enjoy. Keep the things you love and ditch what doesn’t serve you. If you miss it or regret it, you can always replace it at a later date.
Check Your Pensions: Secure Your Future
While retirement may seem like a distant dream, it’s essential to regularly review your pension plans to ensure you’re on track to meet your retirement goals. Take inventory of all your pension accounts and review their performance and fees. If you have multiple pensions from previous employers, consider consolidating them to simplify your retirement planning and potentially reduce fees.
Track down old pensions
You may have lost track of your old pensions if it has been a while since you changed jobs. There are services available to help you track down old pensions which you can use to help you. This will ensure that you know about and can get access to all pension income that is due to you. Don’t delay, as you may have money that can be added to a current pension pot that would otherwise be lost!
Maximise contributions
Always maximise your contributions to take advantage of employer matches or tax benefits. For example, my employer will double match my contributions up to 5%, so for my 5%, they will double match to 10%. I have made sure that I contribute the maximum to get employer double matching. Your employer may match your contributions up to 9% or 10% so it is worth looking into. This is particularly useful if you are close to, or in the 40% higher tax bracket, as paying more into your pension can mean a bigger tax saving. It is always worth checking what will work best for you and your own personal circumstances.
Choose your investments
It is also possible that within your pension you will be able to select your own investments. My workplace pension with Standard Life allows this, and historically, the self selected investment options have performed better than the lower risk option selected by the employer. It can be worth getting advice on this from an Independent Financial Advisor if you are unsure about whether this is the right option for you.
Divert your bonuses
Another way that you may be able to grow your pension pot more quickly is by diverting any bonus or profit share payments straight into your workplace pension. The benefit of this is that you will not have to pay any Income Tax or National Insurance on this money and it will grow as part of your pension pot, making your overall pension savings greater. This is something that I personally do as I don’t factor my bonus into my budget. Because I am quite aggressively saving for retirement, this is helping me to meet my goals.
Would you consider sending your bonus payments to your pension if it meant that you would have a more comfortable retirement?
Make a Debt Plan: Tackle Your Debts Strategically
Debt can weigh heavily on your finances and overall well-being. Take this opportunity to assess your outstanding debts, including credit cards, loans, and mortgages. List every debt and how much is owed then create a debt repayment plan. This can be a very eye-opening exercise, but is the most important first step to getting a clear idea and taking control of your debts. You may want to consider debt consolidation or refinancing options to lower your interest rates and simplify your payments. For example, a 0% interest balance transfer credit card could help you to manage repayments and give more breathing room to tackle your higher interest debts first while paying the minimum on the 0% debt.
Debt clearance strategy
As well as debt consolidation or refinancing, there are some proven strategies for debt clearance. One such is the debt snowball method for paying off your debt. Created by Dave Ramsey, this method helps you to pay off your debts quickly by concentrating on one at a time, from the smallest to the largest. The theory behind it is that you will feel energised by getting rid of each debt in turn which will keep you motivated. It works, very simply like this:
- List your debts (except your mortgage) from smallest to largest (regardless of interest rate).
- Make minimum payments on all your debts except the smallest debt.
- Pay as much extra money as you can towards your smallest debt until it’s gone.
- Take what you were paying on your smallest debt and add that to your payment on the next-smallest debt until it’s gone too.
- Repeat until each debt is paid in full!
Like a snowball, the payments you are able to put towards each debt increase as the number of debts decrease, making it fast and efficient to become debt free. With a clear plan in place, you can chip away at your debt and work towards financial freedom.
Get Investing: Grow Your Wealth
Investing is a powerful tool for building long-term wealth and achieving your financial goals. This spring, consider starting or expanding your investment portfolio. Take advantage of Individual Savings Accounts (ISAs), which offer tax-efficient savings and investment opportunities. For the current financial year, the ISA allowance allows you to invest up to £20,000 across cash, stocks and shares, and innovative finance ISAs. Whether you’re saving for a house, retirement, or a rainy day fund, investing can help your money work harder for you. It is of course, more important to ensure you rid yourself of expensive debts first, but opening an investment account is a great idea and the earlier you can start, the better.
Open an account with Trading212 and get a free fractional share when you deposit just £1 in an invest or ISA account or an investing. This is a great platform to dip your toe into investing as it is so straightforward to use and set up.
Review Your Insurance Policies: Protect What Matters
Insurance is a vital component of your financial plan, providing protection and peace of mind against unexpected events. Take the time to review your insurance policies, including health, life, home, and vehicle insurance. Ensure your coverage is adequate for your needs and consider whether you could benefit from additional or updated policies. Shopping around for insurance quotes can help you find the best coverage at the most competitive rates, potentially saving you money in the long run. You can even get cashback by purchasing through a site such as TopCashBack which you can withdraw to your bank, Paypal or get giftcards. This can be a great way to save extra for birthdays or Christmas by getting cashback for purchases you were making anyway!
Set SMART Financial Goals: Chart Your Course
Finally, spring cleaning your finances is an excellent opportunity to set new financial goals or revisit existing ones. Use the SMART criteria ”Specific, Measurable, Achievable, Relevant, and Time-bound” to set clear and actionable goals. Whether you’re saving for a dream vacation, buying a home, or building an emergency fund, having well-defined goals can keep you motivated and focused on your financial journey. Celebrate your successes, no matter how small
In conclusion, spring cleaning your finances is a valuable exercise that can lead to greater financial stability and peace of mind. By creating a budget, managing your debts and investments and setting SMART financial goals, you can take control of your finances and make the most of your money this spring and beyond. Happy spring cleaning!
Did anything surprise you? Will you make the effort to spring clean your finances? Let me know in the comments what you think is the most important aspect of spring cleaning your finances.
Disclaimer
I am not a financial advisor and am solely sharing my own opinions based on my own experience. It is recommended that you seek the advice of a financial professional before making any decision about whether investing is right for you. Investing carries risk and you may get back less than you put in. Previous performance of a fund is not an indication of future performance.
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